What Auto Insurance Covers: Understanding Your Options
Insurance is financial protection. If you have liability insurance, you will be covered for the other drivers' losses and injuries up to limits if you caused an accident.
The most commonly misunderstood fact about liability insurance is that it does not cover damages to your car if you caused a car accident.
However, if you have collision insurance, you will be covered for repairs to your car even if you caused the accident. If you are sued by the other driver, you are also protected with your liability coverage.
Bodily Injury Liability
Your liability auto insurance coverage includes bodily injury liability (BI). Bodily injury coverage on your car insurance coverage will pay for the medical expenses of the other driver and their passenger(s) if you're at fault as well as lost wages due to the accident. BI car insurance will also cover funeral costs.
Your insurance company will allow you to buy the lowest limits of bodily injury coverage required by the state but a good insurance agent will advise you to raise your liability limits. Car accidents are pricey, so make sure you're covered.
You are not covered by BI and neither are your passengers if you're at fault. If you don't have health insurance, it's a good idea to buy personal injury protection (PIP), which is required if you live in a no fault state, or medical payments coverage, which will help to protect yourself and your loved ones.
If you are not at fault, your medical expenses are covered by the other driver's insurance company.
Property Damage Liability
Property damage liability (PD) is the portion of your auto insurance that pays for damages to the other driver's car and other property if you're at fault in the car accident. Your car insurance company will pay for the damages, but your insurance rate may go up.
Property damage liability does not pay for damage to your car. For that, you'd need collision coverage, an optional coverage that will cover costs for your loss (more on this below).
Am I Covered for a Hit-and-Run Accident?
The rules for which coverage applies in a case of hit-and-run will vary from one insurance company to another. Several types of insurance may apply, including collision, uninsured and underinsured motorist and liability insurance. State laws also vary.
Gap Insurance and Other Optional Coverages
There are many types of coverages, including comprehensive, gap and more. Gap insurance is a type of insurance that covers you when you own more money on your car loan than the value of the car.
Often, cars cost more than their Kelley Blue Book value, which complicates matters if your car is declared a total loss. In the event that you total a car with an upside down loan, gap insurance would pay you the remaining balance of what you owe on the car after collision coverage pays out the car's total cash value.
The more insurance you have, the less likely that you will have to pay for any losses. However, sometimes it's more cost-effective to have less insurance, especially if your car has very little value. For instance, you don't want to pay more in collision coverage a year than your car is worth because you will never get paid more than the car's blue book value.
Collision insurance is not required in every state but many people misunderstand its purpose. Collision will take care of your costs if the accident was your fault. It will only cover your car if you collide with another car or an object, like a pole or tree. It will not cover damages or injury to the other driver; your liability insurance will.
Comprehensive coverage will pay for losses if your car is stolen or damaged by anything other than a collision, including earthquakes, vandalism, falling objects, theft or storm damage. Hail storms, for instance, are a covered peril if you have comprehensive insurance. The repairs to the hail damage would be covered by your insurer.
If you want coverage for your own medical costs after an accident, you may consider personal injury protection (PIP), which is required in some states but not most of them. With this coverage you may even have coverage for lost wages.
Uninsured Motorist Coverage (UM or UIM)
Uninsured driver coverage is required in 19 states. Uninsured motorist/underinsured motorist (UM/UIM) will protect you against medical expenses if the other driver has no insurance or too little insurance. If you don't have UM or UIM coverage, you have the option of suing the other driver if they carry no insurance but if they don't have the money, you will be stuck with the bill.
There's also uninsured motorist property damage (UMPD) coverage, which pays for repairs so you don't have to pay for damages to your car and personal belongings out of pocket.
Roadside Assistance or Towing Insurance
Roadside assistance provides help for a battery jump, flat tire change or towing to a repair shop after a medical breakdown. Some people also opt for full glass coverage, which would pay to repair or replace chipped or broken windows without having to pay a deductible.
Rideshare coverage is also an important coverage to invest in if you drive for Uber or Lyft. There is a period of time when you're accepting ride fares when you're neither covered by your personal car insurance nor your employer's insurance policy. Rideshare insurance takes care of protecting you during this gap in time.
Auto Insurance Coverages
Auto policy coverage options vary slightly from one insurer to the next, but a trustworthy agent can help tailor a car insurance policy that will best protect you and your loved ones. Start a free quote after answering a few questions. Begin by entering your zip code on this page.
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